Gujarat will impose a five per cent value added tax on technical textiles. Technical textiles are used in industries including building construction, civil engineering, furniture, household textiles, floor coverings, automobiles, shipping, railways and packaging. The raw materials used in its manufacturing are artificial materials like plastic, nylon, resins, rubber and metal, meaning significant value addition for technical textile products.

The tax is estimated to increase the state’s tax revenue by about Rs 80 crores.

All other types of fabrics used for garments and domestic use will remain exempt from tax in the state. There is also a proposal to refund the tax paid on existing five per cent cotton roving tax to promote the use of the handwoven cloth, khadi, and eliminate the tax burden on the purchase of cotton roving used to manufacture khadi. This may reduce Gujarat’s tax revenue by about Rs 1 crores.

VAT is a multi-point destination based system of taxation, with tax being levied on value addition at each stage of transaction in the production or distribution chain. The term value addition implies an increase in the value of goods and services at each stage of production or transfer of goods and services. VAT is a tax on the final consumption of goods or services and is ultimately borne by the consumer.